March 19, 2015 / 8:24 AM / 3 years ago

Fed rate hike view hurts Asia FX sentiment; yuan exception: Reuters poll

The United States Federal Reserve Board building is shown behind security barriers in Washington October 28, 2014. REUTERS/Gary Cameron

SINGAPORE (Reuters) - Bearish bets on most emerging Asian currencies increased in the last two weeks, with short positions in the Singapore dollar at a six-year high, as the Federal Reserve moved closer to raising interest rates, a Reuters poll showed on Thursday.

Short positions on the Chinese yuan CNY=CFXS, however, were reduced on perceptions that the central bank would support the currency, according to the survey of 12 currency analysts from banks and asset management companies conducted between Tuesday and Thursday.

The Fed dropped a reference to being “patient” on rates from its policy statement on Wednesday, opening the door wider for a hike this year. At the same time, the central bank downgraded its economic growth and inflation forecasts, signaling it is in no rush to raise borrowing costs.

That caused investors to scale back expectations of a rate hike in June. Top Wall Street firms now see a Fed lift off in September.

While the Fed is expected to raise rates, central banks in Asia are likely to ease policy to tackle economic sluggishness and deflationary pressures.

Pessimistic bets on the Singapore dollar SGD=D3 soared to their largest since January 2009.

The Singapore dollar fell to its weakest since July 2010 last week as a slowing economy and inflation added to expectations that the central bank may ease monetary policy further in April.

The Indonesian rupiah’s IDR=ID short positions hit the highest since January 2014 as the currency fell to its weakest since August 1998.

The rupiah came under pressure from capital outflows and dollar demand from local companies. The central bank was spotted intervening to support the worst performing Asian currency so far this year, but it refrained from reversing the trend.

Short positions in the South Korean won KRW=KFTC increased to the largest since early December after the central bank unexpectedly cut its policy interest rate KROCRT=ECI to a record low of 1.75 percent last week.

Sentiment on the Thailand’s baht THB=TH became the most pessimistic since mid-December as the Bank of Thailand also slashed its benchmark interest rate THCBIR=ECI.

Short positions on the Malaysian ringgit MYR=MY rose to the highest level since late January as sliding oil prices underscored concerns that lower crude may hurt the country’s current account surplus and result in a wider fiscal deficit. Malaysia is a net oil exporter.

The currency came under further pressure from growing worries about a cut in sovereign ratings.

Sentiment towards the Philippine peso PHP=PDSP turned negative for the first time since late January as investors scrambled for dollars to cover short positions.

The yuan bucked the regional pessimism, hitting a two-month high.

China’s central bank was suspected of intervening to stabilize the currency to curb speculators betting on its depreciation amid a gloomy outlook for the world’s second-largest economy. It also set the currency’s midpoint firmer.

The poll is focused on what analysts believe are the current market positions in nine Asian emerging market currencies: the Chinese yuan, South Korean won, Singapore dollar, Indonesian rupiah, Taiwan dollar TWD=TP, Indian rupee INR=D2, Philippine peso, Malaysian ringgit and the Thai baht.

The yuan firmed sharply for the third straight day on Thursday, breaking through its 200-day moving average and recouping all of its losses for the year as corporate flight out of long-dollar positions intensified. [CNY/]

The poll uses estimates of net long or short positions on a scale of minus 3 to plus 3.

A score of plus 3 indicates the market is significantly long U.S. dollars. The figures include positions held through non-deliverable forwards (NDFs).

Additional reporting by Shaloo Shrivastava in BENGALURU; Editing by Kim Coghill

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